A Metro Gold Line pulls in to the Lake Ave station as traffic on the 210 freeway passes by in Pasaden in 2018. The Gold Line is operated by the Los Angeles County Metropolitan Transportation. All told, the independent government agency had $1.6 billion in cash and investments, according to 2017 data from the California State Controller. (Photo by Nick Agro, Contributing Photographer)

California’s most affluent special districts nearly doubled their spending over the course of a decade, while the value of their cash and investments nearly tripled, according to a Southern California News Group analysis of state data.

The figures revive the question many good-government advocates have been asking for decades: Do special districts, which operate largely under the public radar, simply have too much money?

Critics say they do, and argue that their functions should be absorbed into cities and counties that overlap their boundaries.

Special districts say they don’t, insisting they simply safeguard vital infrastructure and are better left alone.

California’s 250 largest special districts had cash and investments worth $47.1 billion when the 2017 fiscal year drew to a close, up dramatically from $17.9 billion a decade earlier, according to data from the State Controller’s Office. That’s a leap of almost $30 billion, or 164 percent.

“From the perspective of California taxpayers, special districts are neither inherently good nor inherently bad,” said Jon Coupal, CEO of the conservative Howard Jarvis Taxpayers Association, in testimony to the Little Hoover Commission in 2016.

“However, few can deny that many government entities have abused the public trust by hoarding vast sums of money.”

Special districts insist he is wrong. They are the guardians of water, sewer, transportation systems and the like — and their money is earmarked to build, repair and replace vital infrastructure, they say.

Quarter-billion-dollar club

Six special districts in California have amassed more than $1 billion each in cash and investments, with transportation agencies accumulating the richest treasure chests, according to the data.

Riders board the Red Line at Union Station. The Los Angeles County Metropolitan Transportation Authority – a special district better known as Metro – is the transportation planner and coordinator, designer, builder and operator for one of the nation’s largest and most populous counties. ( Photo by David Crane, Los Angeles Daily News/SCNG)

Orange County Water District officials were so confident in the purity of their recycled waste water that they handed out bottles of it in Hollywood in March 2017. (Photo courtesy of Orange County Water District)

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Irvine Ranch Water District’s purple pipes deliver recycled water.

This water intake screen at the West Basin Municipal Water District’s water recycling plant in El Segundo is a smaller version of those planned for a $380 million oceanwater desalination plant proposed to be built in the city. Photo by Megan Barnes.

West Basin Municipal Water District headquarters in Carson.
Photo by Robert Casillas, Daily Breeze/SCNG

Chairman Randy A. Record, center, and board members listen as people give a speech during Metropolitan Water District board meeting in Los Angeles on Tuesday, Oct. 10, 2017. (Photo by Ed Crisostomo, Los Angeles Daily News/SCNG)

Charming Evelyn, right, Sierra Club member, addresses the media, as Kathleen Smith, left, Sierra Club member, and others show their signs during a press conference at Metropolitan Water District courtyard in Los Angeles on Tuesday, Oct. 10, 2017. (Photo by Ed Crisostomo, Los Angeles Daily News/SCNG)

People show their signs during Metropolitan Water District board meeting in Los Angeles on Tuesday, Oct. 10, 2017. (Photo by Ed Crisostomo, Los Angeles Daily News/SCNG)

Importing 2,500 gallons of water per minute from Colorado River, into its spreading basins to clear the yellow water Tuesday, December 22, 2015. Sierra Madres water problems began to spiral downward two years ago when it could no longer draw water from its own wells in the Raymond Basin and began to bring in imported water from the Metropolitan Water District. Since then, the city has spent thousands of dollars on water treatments and tests to clear up the yellow water that was coming from the citys aging water system due to the change in chemistry from the MWD water knocking rust in the pipes loose. (Photo by Walt Mancini/Pasadena Star-News)

Another 48 from all over the state — hospital, utility, water, sewer, flood control, air quality districts and the like — have cash and investments exceeding a quarter-billion dollars each.

The billion-plus players in 2017 were mainly in the business of moving Californians: the Bay Area’s Metropolitan Transportation Commission ($3.8 billion), the Los Angeles County Metropolitan Transportation Authority ($1.6 billion), the San Francisco Bay Area Rapid Transit District ($1.55 billion), the Orange County Transportation Authority ($1.48 billion), the Metropolitan Water District of Southern California ($1.37 billion), and the Santa Clara Valley Transportation Authority ($1.06 billion).

The Legislature began requiring the 250 special districts with the greatest annual revenues to have their finances called out separately shortly after the Little Hoover Commission — a good-government watchdog with no enforcement powers — spotlighted reserves that dwarfed annual spending in dozens of agencies and blasted districts for amassing tremendous piles of cash.

That blistering study, “Special Districts: Relics of the Past or Resources for the Future?” was released in 2000. It bemoaned that hospital districts that no longer run hospitals continued to exist and collect taxes. It chided Local Agency Formation Commissions — one in every county, charged with ensuring efficiency — for being unable or unwilling to make sensible mergers happen. It urged a standard definition for “reserve funds” and greater transparency in reporting them.

In 2017, the Little Hoover Commission issued an update: “Special Districts: Improving Oversight & Transparency.” It was a friendlier assessment, but bemoaned that hospital districts continued to exist and collect taxes, even when they don’t fund hospitals. And that Local Agency Formation Commissions were unable or unwilling to make sensible government mergers happen, even though that is their mission. It called for a standard definition of “reserve funds” and greater transparency in reporting them.

While some reformers throw their hands up at the snail’s pace of progress, there have been some improvements, said Pedro Nava, an attorney and chairman of the Little Hoover Commission. From 2000 to 2017, districts made big strides in how they communicate their activities and finances with the public, he said — though even today, not every district has a website.

What are they, anyway?

“At any given moment in any random neighborhood, millions of Californians whirl through their lives within the boundaries of special districts,” the commission said with some flourish in its 2017 report.

“During their relentless proliferation over the past 75 years or more, they have become the backbone of California’s vast public services delivery system and the state’s most common form of local government.

“Typically, most residents living in these districts know little about them, how they operate, who runs them and what they pay in taxes or fees to support them. Yet California has an estimated 2,071 independent special districts — many with the power to collect property taxes, to send monthly bills and collect fees and frequently to make voters scratch their heads over a list of unfamiliar candidates during election time.”

Special districts are a unique creation of California, dating to 1877 when there were few city or county governments around to furnish basic services. But most of them were created after World War II to accommodate millions of newcomers. Hospital districts provided medical care, library districts put books on the shelves, vector control districts battled mosquitoes, water districts provided water.

“Today, this vast interlaced and unruly governing landscape of city, county and special district service providers is locked into place, the vestige of seven decades of hurry-up growth and hyperactive local agency creation,” the commission said.

“Special districts seem to possess advantages — or, conversely, lack wide-scale harms — that make them mostly tolerable to their constituents in the larger scheme of governing and able to forestall movements to purge them on a significantly large scale.”

Redundant districts?

The poster child for this may be California’s 79 health-care districts, only 37 of which operate hospitals.

San Bernardino County has three: Bear Valley Community Healthcare District, Hi-Desert Memorial Hospital District and San Bernardino Mountains Community Hospital District.

Orange County has none.

In its 2017 update, the Little Hoover Commission said, “The Legislature, local grand juries, LAFCOs and healthcare analysts continue to question their relevance and need to exist.” But many hospital-challenged health-care districts claim they’re carving out new roles in preventative care.

One of those is the Beach Cities Health District, which serves the South Bay coastal communities of Hermosa Beach, Manhattan Beach and Redondo Beach. Established in 1955, it has had no hospital since 1998 but calls itself “one of the largest preventive health agencies in the nation.”

The district encourages children to walk to school, eat right and lose weight. It provides community grants, discount memberships at a district fitness center and helps older people remain living at home through personal visits and in-home care. Its “innovative Blue Zones Project branding effort also encourages healthy habits at home and work and promotes local restaurants that offer nutritious menus,” the Hoover Commission said.

For this, the district gets $3.1 million in annual property taxes, about one-quarter of its $13.9 million in revenue last year.

‘Stealth support’?

Districts like Beach Cities — which had a slice of the property tax pie when Proposition 13 radically remade California’s government funding in 1978 — still get those property taxes.

Districts that didn’t get a piece of the pie back then — often because they had fiscally conservative boards that didn’t want to tax local property owners — are locked out of that funding.

“This inability to redistribute county property taxes for new program realities means libraries and parks may deteriorate due to taxing decisions made in the 1970s while nearby fire districts buy the best, newest fire trucks and healthcare districts give tax-funded grants to sometimes-questionable recipients — all while also maintaining reserve funds,” the Little Hoover Commission said.

That often increases a region’s tax load, as a struggling public library system must seek an additional parcel tax while a nearby water district “has seemingly outsized financial reserves,” the commission said.

Orange County’s Irvine Ranch Water District has often crowed about having the county’s lowest water rates, but that’s possible only because nearly one-quarter of its revenues flow from property taxes, not water fees. Property taxes provided $37.7 million for Irvine Ranch last year.

In contrast, the Costa Mesa-based Mesa Water District levied zero property taxes when the formulas were locked in, and gets zero property taxes today. Unlike Irvine Ranch, it must charge its customers the full price of what it costs to deliver water.

An Orange County grand jury branded this unseen subsidizing as “stealth support.” It said sewer and water districts should be weaned from the tax rolls and become solely fee-based, that community service districts should do the same and let surrounding cities or homeowners associations provide services, that library districts should be absorbed into local city governments or county library systems, and that cemetery and vector control districts should disappear and be incorporated into counties.

That hasn’t quite come to pass.

Consolidation a ‘bad idea’?

That the large-scale consolidation demanded by critics for more than a quarter-century has not happened suggests it’s too difficult — or “maybe it’s just a bad idea,” Kyle Packham of the California Special Districts Association told the commission.

“The linchpin to the effectiveness of special districts is their authority over revenues and expenditures. They’re independent,” Packham testified. “Giving another body the purse strings might as well be handing them chains and shackles. He who controls, or she who controls, the revenue controls the outcomes.”

While casting elected county and city governments in such sinister light strikes some as a stretch, special districts point to the trouble big and small cities have maintaining water and sewer infrastructure when those departments must battle for budgetary priority with police, parks and libraries.

Officials from the districts with the largest cash and investments — particularly the transportation agencies — say much of the money is earmarked for large construction projects and repayment of debt. The rest, they say, is set aside for maintaining the system and prudent reserves.

California’s most affluent special districts nearly doubled their spending over the course of a decade, while the value of their cash and investments nearly tripled, according to a Southern California News Group analysis of state data. The figures revive the question many good-government advocates have been asking for decades: Do special districts, which operate largely […]

California’s most affluent special districts nearly doubled their spending over the course of a decade, while the value of their cash and investments nearly tripled, according to a Southern California News Group analysis of state data. The figures revive the question many good-government advocates have been asking for decades: Do special districts, which operate largely […]

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California’s most affluent special districts nearly doubled their spending over the course of a decade, while the value of their cash and investments nearly tripled, according to a Southern California News Group analysis of state data. The figures revive the question many good-government advocates have been asking for decades: Do special districts, which operate largely […]

California’s most affluent special districts nearly doubled their spending over the course of a decade, while the value of their cash and investments nearly tripled, according to a Southern California News Group analysis of state data. The figures revive the question many good-government advocates have been asking for decades: Do special districts, which operate largely […]

Teri Sforza is one of the lead reporters on the OCR/SCNG probe of fraud, abuse and death in the Southern California addiction treatment industry. Our "Rehab Riviera" coverage won first place for investigative reporting from the California Newspaper Publishers Association, first place for projects reporting from Best of the West and is a finalist for the National Institute for Health Care Management Foundation's print award, competing with the New York Times, the Washington Post and ProPublica. Sforza birthed the Watchdog column for The Orange County Register in 2008, aiming to keep a critical (but good-humored) eye on governments and nonprofits, large and small. It won first place for public service reporting from the California Newspaper Publishers Association in 2010. She also contributed to the OCR's Pulitzer Prize-winning investigation of fertility fraud at UC Irvine, covered what was then the largest municipal bankruptcy in America‘s history, and is the author of "The Strangest Song," the first book to tell the story of a genetic condition called Williams syndrome and the extraordinary musicality of many of the people who have it. She earned her M.F.A. from UCLA's School of Theater, Film and Television, and enjoys making documentaries, including the OCR's first: "The Boy Monk," a story that was also told as a series in print. Watchdogs need help: Point us to documents that can help tell stories that need to be told, and we'll do the rest. Send tips to watchdog@ocregister.com.